CUET 2026 Economics May 15 Shift 1 Question Paper- Download Answer Key and Solution PDF

Step 1: Understand normal profit.
Normal profit occurs when: \[ \mathrm{Total\ Revenue = Total\ Cost} \]
Thus: \[ \mathrm{Economic\ Profit = 0} \]
Hence statements (A) and (B) are correct.
Step 2: Analyze statement (C).
Price equal to minimum AVC represents shutdown point condition in short run.
It does not necessarily imply normal profit.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 3: Analyze statement (D).
In long run equilibrium: \[ P=ATC \]
At this point firms earn: \[ \mathrm{Normal\ Profit} \]
Hence: \[ \Rightarrow \mathrm{Correct} \]
Step 4: Identify correct combination.
Correct statements are: \[ (A),\ (B),\ and\ (D) \]
Therefore, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Normal Profit: \[ TR=TC \] \[ \mathrm{Economic\ Profit}=0 \] Long run equilibrium: \[ P=ATC \]

Step 1: Understand the problem of ``What to produce?''
This central problem of an economy deals with:
Choice among different goods and services
Allocation of scarce resources
Priority of production
Step 2: Analyze statement (A).
Choosing between: \[ \mathrm{Necessities\ and\ Luxury\ Goods} \]
is part of deciding what goods should be produced.
\[ \Rightarrow \mathrm{Correct} \]
Step 3: Analyze statement (B).
Allocation of resources between: \[ \mathrm{Education\ and\ Military\ Services} \]
is also related to what society wants to produce.
\[ \Rightarrow \mathrm{Correct} \]
Step 4: Analyze statement (C).
Choice between: \[ \mathrm{Labour-Intensive\ and\ Capital-Intensive} \]
methods belongs to: \[ \mathrm{How\ to\ Produce} \]
not what to produce.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 5: Analyze statement (D).
Choosing between: \[ \mathrm{Consumption\ Goods\ and\ Investment\ Goods} \]
is also a part of deciding what to produce.
\[ \Rightarrow \mathrm{Correct} \]
Step 6: Identify the correct combination.
Correct statements are: \[ (A),\ (B),\ and\ (D) \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Central problems of an economy: \[ \mathrm{What\ to\ Produce} \] \[ \mathrm{How\ to\ Produce} \] \[ \mathrm{For\ Whom\ to\ Produce} \]

Step 1: Understand short-run supply curve.
In the short run, a firm will continue production only if: \[ P \geq AVC \]
If price falls below AVC, the firm shuts down.
Step 2: Relation between SMC and supply curve.
The firm's short-run supply curve is: \[ \mathrm{That\ portion\ of\ SMC\ curve\ which\ lies\ above\ minimum\ AVC} \]
because:
SMC determines output level
AVC determines shutdown point
Step 3: Analyze the options.
Option (A)
Downward-sloping portion cannot be supply curve.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (B)
Correct definition of short-run supply curve.
\[ \Rightarrow \mathrm{Correct} \]
Option (C)
Entire SMC curve includes portion below AVC.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (D)
Below AVC firm shuts down.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 4: Identify the correct option.
Therefore: \[ \boxed{\mathrm{The\ rising\ portion\ of\ SMC\ above\ minimum\ AVC}} \]
Hence, the correct answer is: \[ \boxed{\mathrm{(B)}} \] Quick Tip: Short-run supply curve: \[ \mathrm{SMC\ above\ minimum\ AVC} \] Shutdown condition: \[ P

Step 1: Analyze statement (A).
In perfect competition: \[ \mathrm{No\ individual\ buyer\ or\ seller\ can\ influence\ market\ price} \]
Firms are: \[ \mathrm{Price\ Takers} \]
Hence: \[ \Rightarrow \mathrm{Correct} \]
Step 2: Analyze statement (B).
In perfect competition: \[ \mathrm{Products\ are\ homogeneous} \]
There is no product differentiation.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 3: Analyze statement (C).
Perfect competition assumes: \[ \mathrm{Free\ Entry\ and\ Exit} \]
Thus: \[ \Rightarrow \mathrm{Correct} \]
Step 4: Analyze statement (D).
In long run equilibrium: \[ P=ATC \]
Firms earn only: \[ \mathrm{Normal\ Profit} \]
not super-normal profit.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 5: Identify correct combination.
Correct statements are: \[ (A)\ and\ (C) \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Features of perfect competition: \[ \mathrm{Homogeneous\ Product} \] \[ \mathrm{Free\ Entry\ and\ Exit} \] \[ \mathrm{Price\ Taking\ Firms} \]

Step 1: Understand the meaning of inventory.
Inventory refers to stock of goods held by a business for:
Production
Sale
Future use
Step 2: Identify items included in inventory.
Inventory generally includes:
Raw materials
Work-in-progress or semi-finished goods
Unsold finished goods
Step 3: Analyze the options.
Raw materials
Used for production.
\[ \Rightarrow \mathrm{Included} \]
Semi-finished goods
Partially completed goods.
\[ \Rightarrow \mathrm{Included} \]
Sold finished goods
Once sold, they are no longer part of stock.
\[ \Rightarrow \mathrm{Not\ Included} \]
Unsold finished goods
Available for sale and part of inventory.
\[ \Rightarrow \mathrm{Included} \]
Step 4: Identify the correct option.
Therefore: \[ \boxed{\mathrm{Sold\ Finished\ Goods}} \]
Hence, the correct answer is: \[ \boxed{\mathrm{(C)}} \] Quick Tip: Inventory includes: \[ \mathrm{Raw\ Materials} \] \[ \mathrm{Work-in-Progress} \] \[ \mathrm{Unsold\ Finished\ Goods} \]

Step 1: Match Intermediate Goods.
Intermediate goods are: \[ \mathrm{Goods\ completely\ used\ in\ production} \]
Thus: \[ (A)\rightarrow(III) \]
Step 2: Match Unplanned Accumulation of Inventories.
When sales unexpectedly fall: \[ \mathrm{Unsold\ stock\ increases} \]
This leads to: \[ \mathrm{Unplanned\ Accumulation} \]
Thus: \[ (B)\rightarrow(IV) \]
Step 3: Match Change in Inventories Formula.
Change in inventories is: \[ \mathrm{Production - Sales} \]
Thus: \[ (C)\rightarrow(II) \]
Step 4: Match Unplanned Decumulation of Inventories.
Unexpected rise in sales causes: \[ \mathrm{Stock\ depletion} \]
Thus: \[ (D)\rightarrow(I) \]
Step 5: Identify correct option.
Correct matching is: \[ (A)\rightarrow(III) \]
\[ (B)\rightarrow(IV) \]
\[ (C)\rightarrow(II) \]
\[ (D)\rightarrow(I) \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Inventory Change: \[ \mathrm{Production - Sales} \] Unplanned accumulation: \[ \mathrm{Sales < Production} \] Unplanned decumulation: \[ \mathrm{Sales > Production} \]

Step 1: Understand liquidity trap.
Liquidity trap is a situation where: \[ \mathrm{Interest\ rates\ become\ extremely\ low} \]
and people prefer holding cash instead of bonds.
Step 2: Effect of increasing money supply.
In liquidity trap: \[ \mathrm{Increase\ in\ money\ supply} \]
does not reduce interest rate further.
Thus monetary policy becomes ineffective.
\[ \Rightarrow \mathrm{Money\ supply\ has\ little\ or\ no\ impact} \]
on:
Interest rates
Demand for bonds
Step 3: Analyze remaining options.
Option (B)
Liquidity trap occurs at very low interest rates, not indefinitely increasing rates.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (C)
Money continues to be important in the economy.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (D)
Liquidity trap is related to recession and low interest rates, not high inflation.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 4: Identify the correct option.
Therefore: \[ \boxed{\mathrm{Money\ supply\ has\ no\ significant\ impact\ on\ interest\ rates}} \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Liquidity trap occurs when: \[ \mathrm{Interest\ Rates\ are\ Extremely\ Low} \] People prefer: \[ \mathrm{Holding\ Cash\ instead\ of\ Bonds} \]

Step 1: Understand market equilibrium.
Market equilibrium occurs when: \[ \mathrm{Quantity\ Demanded = Quantity\ Supplied} \]
At this point: \[ \mathrm{Market\ Price} \]
is determined through interaction of: \[ \mathrm{Demand\ and\ Supply} \]
Step 2: Analyze the options.
Option (A)
Prices are determined by: \[ \mathrm{Market\ Forces\ of\ Demand\ and\ Supply} \]
\[ \Rightarrow \mathrm{Correct} \]
Option (B)
Government intervention is not necessary in free market equilibrium.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (C)
Individual firms are price takers in competitive markets.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (D)
Consumers influence demand, not supply directly.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 3: Identify the correct option.
Therefore: \[ \boxed{\mathrm{Market\ Forces\ of\ Supply\ and\ Demand\ Determine\ Prices}} \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Market equilibrium: \[ Q_d = Q_s \] Price is determined by: \[ \mathrm{Demand\ and\ Supply} \]

Step 1: Understand excess demand.
Excess demand occurs when: \[ Q_d > Q_s \]
that is: \[ \mathrm{Quantity\ Demanded > Quantity\ Supplied} \]
This creates shortage in the market.
Step 2: Effect on price.
Due to shortage: \[ \mathrm{Buyers\ compete\ for\ limited\ goods} \]
As a result: \[ \mathrm{Price\ rises} \]
Step 3: How equilibrium is restored.
Increase in price:
Reduces demand
Increases supply
Eventually: \[ Q_d = Q_s \]
and equilibrium is restored.
Step 4: Analyze remaining options.
Option (B)
Price decrease would increase excess demand further.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (C)
Price cap may worsen shortage.
\[ \Rightarrow \mathrm{Incorrect} \]
Option (D)
Stopping production reduces supply further.
\[ \Rightarrow \mathrm{Incorrect} \]
Step 5: Identify the correct option.
Therefore: \[ \boxed{\mathrm{Prices\ should\ increase}} \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Excess demand: \[ Q_d > Q_s \] Leads to: \[ \mathrm{Rise\ in\ Price} \]

Step 1: Match Effective Demand Principle.
According to Keynes: \[ \mathrm{Demand\ determines\ employment\ and\ output} \]
Thus: \[ (A)\rightarrow(IV) \]
Step 2: Match Autonomous Change.
Autonomous change means: \[ \mathrm{Change\ independent\ of\ other\ economic\ factors} \]
Thus: \[ (B)\rightarrow(III) \]
Step 3: Match Ex-ante Consumption.
Ex-ante consumption means: \[ \mathrm{Planned\ or\ expected\ consumption\ expenditure} \]
before actual occurrence.
Thus: \[ (C)\rightarrow(II) \]
Step 4: Match Ex-ante Investment.
Ex-ante investment means: \[ \mathrm{Planned\ investment} \]
before actual execution.
Thus: \[ (D)\rightarrow(I) \]
Step 5: Identify correct combination.
Correct matching is: \[ (A)\rightarrow(IV) \]
\[ (B)\rightarrow(III) \]
\[ (C)\rightarrow(II) \]
\[ (D)\rightarrow(I) \]
Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \] Quick Tip: Ex-ante: \[ \mathrm{Planned\ Values} \] Ex-post: \[ \mathrm{Actual\ Values} \]